Term insurance option to be comparable to the whole life

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Reference no: EM131048107

Whole life: For $1,150 per year (annuity) you can invest in the whole life policy and receive a 6% return on your money along with $100,000 of life insurance coverage.

Term life: You can buy $100,000 of life insurance for $400 and invest the rest ($750) in a mutual fund.

You will be 65 years old in 35 years.

a) If you buy the whole life policy, how much will you have accumulated by age 65, assuming you don't die?

b) For the term insurance option to be comparable to the whole life (have the same amount at age 65), what rate of return would you need to earn on your $750 annual mutual fund invest?

Reference no: EM131048107

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